UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
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Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For
the quarterly period ended
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Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from __________ to__________
Commission
File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
| ☐ Large accelerated filer | ☐ Accelerated filer | |
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☐
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If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒
Securities registered pursuant to Section 12(b) of the Act: None
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
Yes ☐ No ☐
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of November 14, 2023, there were outstanding shares of the registrant’s Common Stock, $.01 par value.
INDEX
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our consolidated financial statements included in this Form 10-Q are as follows:
These unaudited consolidated financial statements are condensed and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended September 30, 2023, are not necessarily indicative of the results that can be expected for the full year ending December 31, 2023.
| 3 |
BUBBLR INC.
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
| F- 1 |
BUBBLR INC.
Consolidated Balance Sheets
September 30, 2023 and December 31, 2022
(Unaudited)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ |
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$ |
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| Other receivables |
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| Total current assets |
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| Non-current Assets: | ||||||||
| Property and equipment, net |
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| Intangible assets, net |
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| Total non-current assets |
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| TOTAL ASSETS | $ |
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$ |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ |
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$ |
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| Accrued liabilities |
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| Loan payable, current |
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| Loan payable - related party, current |
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| Total current liabilities |
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| Non-current liabilities: | ||||||||
| Loan payable, non-current |
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| Loan payable - related party, non-current |
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| Warrant derivative liability |
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| Total non-current liabilities |
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| Total Liabilities |
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| Stockholders’ Equity (Deficit) | ||||||||
| Series C Convertible Preferred Stock, $ par value, authorized, shares issued and outstanding |
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| Common stock, $ par value, shares authorized; and shares issued and outstanding at September 30, 2023 and December 31, 2022 |
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| Additional paid-in capital |
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| Accumulated deficit |
(
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) |
(
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) | ||||
| Accumulated other comprehensive income |
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| Total Stockholders’ Equity (Deficit) |
(
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) |
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| TOTAL LIABILITES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F- 2 |
BUBBLR INC.
Consolidated Statement of Operations and Comprehensive Loss
For the three and nine months ended September 30, 2023, and 2022
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Sales |
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| Gross profit |
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| Operating Expenses | ||||||||||||||||
| General and administrative | $ |
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$ |
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$ |
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$ |
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| Professional fees |
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| Sales and marketing |
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| Amortization and depreciation |
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| Research and development |
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| Total operating expense |
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| Operating loss |
(
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) |
(
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) |
(
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) |
(
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) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest income |
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| Interest expense |
(
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) |
(
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) |
(
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) |
(
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) | ||||||||
| Gain (loss) on change in fair value of warrant derivative liability |
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| Foreign currency transaction gain (loss) |
(
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) |
(
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) |
(
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) |
(
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) | ||||||||
| Total other income (expense) |
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(
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) |
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(
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) | ||||||||||
| Net loss before income tax | $ |
(
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) | $ |
(
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) | $ |
(
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) | $ |
(
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) | ||||
| Provision for income tax | ||||||||||||||||
| Net loss after income tax | $ |
(
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) | $ |
(
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) | $ |
(
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) | $ |
(
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) | ||||
| Other comprehensive income (loss) | ||||||||||||||||
| Foreign currency translation gain (loss) |
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| Total other comprehensive income (loss) |
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| Net comprehensive loss | $ |
(
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) | $ |
(
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) | $ |
(
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) | $ |
(
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) | ||||
| Net loss per common share, basic and diluted | $ | ) | $ | $ | ) | $ | ) | |||||||||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||||||||||
| F- 3 |
BUBBLR INC.
Consolidated Statement of Changes in Stockholders’ Deficit
For the nine months ended September 30, 2023, and 2022
(Unaudited)
|
2019 Series A Preferred Stock |
Series B Preferred Stock |
Series C Preferred Stock |
Common Stock |
Additional
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Deferred |
Accumulated Other |
Total Stockholders’
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Number of Shares |
Amount |
Number of Shares |
Amount |
Number of Shares |
Amount |
Number of Shares |
Amount |
Paid-in Capital |
Stock Compensation |
Accumulated Deficit |
Comprehensive Income (Loss) |
Equity (Deficit) |
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| Balance - December 31, 2021 |
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$ | $ | $ |
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$ |
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$ |
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$ |
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$ |
(
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) | $ |
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$ |
(
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) | ||||||||||||||||||||||||||||||||
| Issuance of common shares for Services - Executive Board |
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| Issuance of common shares for Services - Consulting |
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| Issuance of common shares for Equity Finance Agreement Incentive |
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| Issuance of Series C Preferred Shares |
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(
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| Dividend Series C Preferred shares |
(
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(
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) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss |
(
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) |
(
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| Other comprehensive income |
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| Balance -March 31, 2022 |
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$ | $ |
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$ |
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$ |
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$ |
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$ |
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$ |
(
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) | $ |
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$ |
(
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) | |||||||||||||||||||||||||||||||
| Issuance of common shares for Services - Consulting |
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| Issuance of common shares as deferred compensation |
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(
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) | |||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of common shares issued as deferred compensation |
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| Issuance of Series C Preferred Shares |
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| Dividend Series C Preferred Shares |
(
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(
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| Net loss |
(
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) |
(
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| Other comprehensive income |
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| Balance -June 30, 2022 |
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$ | $ |
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$ |
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$ |
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$ |
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$ |
(
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) | $ |
(
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) | $ |
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$ |
(
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) | ||||||||||||||||||||||||||||||
| Issuance of common shares for Services - Consulting |
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| Issuance of common shares for loan waiver |
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| Vesting of common shares issued as deferred compensation |
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| Dividend Series C Preferred Shares |
(
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) |
(
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| Repurchase and cancellation of Special 2019 Series A Preferred Stock via issuance of related party note payable |
(
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(
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(
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| Net loss |
(
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(
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| Other comprehensive income |
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| Balance -September 30, 2022 | $ | $ |
|
$ |
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$ |
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$ |
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$ |
(
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) | $ |
(
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) | $ |
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$ |
(
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) | |||||||||||||||||||||||||||||||
| Balance -December 31, 2022 | $ | $ |
|
$ |
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|
$ |
|
$ |
|
$ |
|
$ |
(
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) | $ |
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$ |
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|||||||||||||||||||||||||||||||||
| Issuance of common shares for Services - Consulting |
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| Forfiet of restricted stock units |
(
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) |
(
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) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares for Sseries C Preferred Shares Dividend |
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| Dividend Series C Preferred Shares |
(
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) |
(
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) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Loss |
(
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) |
(
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) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income |
(
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) |
(
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) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance -March 31, 2023 | $ | $ |
|
$ |
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$ |
|
$ |
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$ |
(
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) | $ |
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$ |
(
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) | ||||||||||||||||||||||||||||||||||
| Issuance of common shares for Services - Consulting |
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| Issuance of common shares for Sseries C Preferred Shares Dividend |
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| Vesting of Share Options |
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| Dividend Series C Preferred Shares |
(
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) |
(
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) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Loss |
(
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) |
(
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) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income |
(
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) |
(
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) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance -June 30, 2023 | $ | $ |
|
$ |
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$ |
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$ |
|
$ |
(
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) | $ |
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$ |
(
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) | ||||||||||||||||||||||||||||||||||
| Issuance of common shares for Services - Consulting |
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| Vesting of Share Options |
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| Dividend Series C Preferred Shares |
(
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) |
(
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) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net Loss |
(
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) |
(
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) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income |
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| Balance -September 30, 2023 | $ | $ |
|
$ |
|
|
$ |
|
$ |
|
$ |
(
|
) | $ |
|
$ |
(
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) | ||||||||||||||||||||||||||||||||||
| F- 4 |
BUBBLR INC.
Consolidated Statement of Cashflows
For the nine months ended September 30, 2023 and 2022
(Unaudited)
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ |
(
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) | $ |
(
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) | ||
| Adjustments for: | ||||||||
| Net loss to net cash used in operating activities: | ||||||||
| Stock based compensation |
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| Stock based finance incentive |
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| Vesting of stock-based compensation |
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| Forfeit of restricted stock units |
(
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) | ||||||
| Change in fair value of warrant derivative liability |
(
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(
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| Amortization of debt discount |
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| Amortization of intangible asset |
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| Depreciation |
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| Changes in operating assets and liabilities: | ||||||||
| Decrease in other receivables |
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| Increase in accrued liabilities |
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| Increase (decrease) in accounts payable |
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(
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) | |||||
| Net cash used in operating activities |
(
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) |
(
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) | ||||
| Cash flows from investing activities | ||||||||
| Proceeds from repayment of advances receivable |
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| Purchase of intangible assets |
(
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) |
(
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) | ||||
| Net cash used in investing activities |
(
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) |
(
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) | ||||
| Cash flows from financing activities | ||||||||
| Payment of dividend |
(
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) | ||||||
| Proceeds from loans payable |
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| Repayment of loans payable |
(
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) |
(
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) | ||||
| Repayment of loans payable - related party |
(
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) |
(
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) | ||||
| Proceeds from loans payable - related party |
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| Net proceeds from issuance of Series C Preferred stock |
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| Net cash provided by financing activities |
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| Effects of exchange rate changes on cash |
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| Net Change in Cash |
(
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) |
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| Cash - Beginning of Period |
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| Cash - End of Period | $ |
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$ |
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| Supplemental information: | ||||||||
| Cash paid for interest | $ |
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$ |
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| Cash paid for taxes | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Common stock issued in satisfaction of dividend payable | $ |
|
$ |
|
||||
| Repurchase and cancellation of Special 2019 Series A Preferred Stock via issuance of related party note payable | $ | $ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements
| F- 5 |
BUBBLR INC.
Notes to the Unaudited Consolidated Financial Statements
September 30, 2023, and 2022
NOTE 1 - ORGANIZATION, BUSINESS AND LIQUIDITY
Organization and Operations
On
March 26, 2020, Bubblr Holdings Ltd. (a UK company formed on February 18, 2016) merged into U.S. Wireless Online, Inc. (“UWRL”),
a Wyoming corporation formed on
Bubblr, Inc. is a Mobile Application software company that is currently developing its disruptive Internet Search Mechanism and seeking license opportunities for a next-generation solution designed to create an alternative economic model.
Going Concern Matters
The
accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the
United States of America (“GAAP”), which contemplates the Company’s continuation as a going concern. The Company incurred
a net comprehensive loss of $
Management intends to raise additional operating funds through equity and/or debt offerings. However, there can be no assurance management will be successful in its endeavors.
There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings, and/or bank financing necessary to support its working capital requirements. To the extent that funds generated from operations and any private placements, public offerings, and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available to the Company, it may be required to curtail or cease its operations.
Due to uncertainties related to these matters, there exists substantial doubt about the ability of the Company to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated interim financial statements have been prepared in accordance with GAAP. The Company’s fiscal year-end is December 31.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Bubblr Holdings Ltd., Bubblr Ltd., and Bubblr CLN Ltd. All significant inter-company balances and transactions have been eliminated in consolidation.
| F- 6 |
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates.
Convertible Financial Instruments
The Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable GAAP.
Fair Value of Financial Instruments
The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 – Quoted prices in non-active markets or in active markets for similar assets or liabilities, observable inputs other than quoted prices, and inputs that are not directly observable but are corroborated by observable market data.
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
The carrying value of the Company’s current assets and liabilities are deemed to be their fair value due to the short-term maturity and realization. During the year ended December 31, 2022, the Company acquired warrant derivative liabilities, which are Level 3 financial instruments that are adjusted to fair market value on reporting dates. At September 30, 2023 and December 31, 2022 the warrant liabilities balances were $83,495 and $198,479 respectively. There were no changes in the fair value hierarchy leveling during the nine months ended September 30, 2023.
We follow ASC Topic 718, Compensation–Stock Compensation, which prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. Share-based payments to employees and non-employees, including grants of stock options, are recognized as compensation expense in the financial statements based on the stock awards’ fair values on the grant date. That expense is recognized over the period required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). Restricted stock units (“RSUs”) issued as compensation in accordance with the Company’s 2022 Equity Incentive Plan are deemed to be unissued until fully vested. RSU compensation is recognized as expense over the vesting period. Upon repurchase of the award any unrecognized compensation, net of cash payments, is expensed immediately. Awards forfeited due to unfulfillment of obligations, such as termination of employment prior to the award being fully vested, for no cash or other consideration, are not recognized as an expense and any previously recognized costs are reversed in the period of forfeiture.
Employees – We account for share-based compensation under the fair value method which requires all such compensation to employees, including the grant of employee stock options, to be calculated based on its fair value at the measurement date (generally the grant date), and recognized in the consolidated statement of operations over the requisite service period.
| F- 7 |
Nonemployees - Under the requirements of the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), we account for share-based compensation to non-employees under the fair value method which requires all such compensation to be calculated based on the fair value at the measurement date (generally the grant date), and recognized in the statement of operations over the requisite service period.
Common Stock Purchase Warrants and Derivative Financial Instruments
Common stock purchase warrants and other derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) that contain reset provisions that do not qualify for the scope exception are classified as liabilities. The Company assesses the classification of its common stock purchase warrants and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.
Pursuant to ASC 260, “Earnings Per Share,” basic net income and net loss per share are computed by dividing the net income and net loss by the weighted average number of common shares outstanding. Diluted net income and net loss per share is the same as basic net income and net loss per share when their inclusion would have an anti-dilutive effect due to our continuing net losses.
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| (Shares) | (Shares) | |||||||
| Series C Preferred Stock |
|
|
||||||
| Warrants |
|
|
||||||
| Convertible Notes |
|
|||||||
| Total |
|
|
||||||
Foreign Currency Translations
The functional currency of the Company’s international subsidiaries is generally their local currency of Great British Pounds (GBP). Local currency assets and liabilities are translated at the exchange rates on the balance sheet date, and local currency revenues and expenses are translated at weighted average exchange rates during the period. Equity accounts are translated at historical rates. The resulting translation adjustments are recorded directly into accumulated other comprehensive income.
| September 30, | December 31, | |||||||||||
| 2023 | 2022 | 2022 | ||||||||||
| Period-end GBP£: U.S.$ exchange rate |
|
|
|
|||||||||
| Weighted average GBP£: U.S.$ exchange rate |
|
|
|
|||||||||
Aggregate
transaction gains or losses, including gains or losses related to foreign-denominated cash and cash equivalents and the re-measurement
of certain inter-company balances, are included in the statement of operations as other income and expense. Losses on foreign exchange
transactions totaling $
| F- 8 |
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes.” The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
As of September 30, 2023, and December 31, 2022, the Company did not have any amounts recorded pertaining to uncertain tax positions.
UK Taxes
We do not consider ourselves to be engaged in a trade or business in the UK and, as such, do not expect to be subject to UK corporate income taxation. We have subsidiaries based in the UK that are subject to the tax laws of that country. Under current law, those subsidiaries are taxed at the applicable corporate income tax rates. Should any UK subsidiaries be deemed to undertake business activities in the US, they would be subject to US corporate income tax in respect of their US activities only. Relief would then be available against the UK tax liabilities in respect of the overseas taxes arising from US activities. At present, this is not applicable as our UK subsidiaries only undertake activities in the UK. Our UK subsidiaries file separate UK income tax returns.
UK Tax Risk
Companies that are incorporated outside the UK may become subject to UK taxes in a number of circumstances, including circumstances in which (1) they are deemed resident in the UK for tax purposes by reason of their central management and control being exercised from the UK or (2) they are treated as carrying on a trade, investing or carrying on any other business activity in the UK, whether or not through a UK Permanent Establishment (“PE”).
In addition, the Finance Act 2015 introduced a new tax known as the diverted profits tax (“DPT”), which is charged at 25% of any “taxable diverted profit.”. The DPT has had an effect since April 1, 2015, and may apply in circumstances including (1) where arrangements are designed to ensure that a non-UK resident company does not carry on a trade in the UK through a PE; and (2) where a tax reduction is obtained through the involvement of entities or transactions lacking economic substance. We intend to operate in such a manner that none of our companies should be subject to the UK DPT and that none of our companies (other than those companies incorporated in the UK) should: (1) be treated as resident in the UK for tax purposes; (2) carry on a trade, invest or carry on any other business activity in the UK (whether or not through a UK PE).
However, this result is based on certain legal and factual determinations, and since the scope and the basis upon which the DPT will be applied by HM Revenue & Customs (“HMRC”) in the UK remains uncertain and since applicable law and regulations do not conclusively define the activities that constitute conducting a trade, investment or business activity in the UK (whether or not through a UK PE), and since we cannot exclude the possibility that there will be a change in law that adversely affects the analysis, HMRC might successfully assert a contrary position. The terms of an income tax treaty between the UK and the home country of the relevant Bubblr subsidiary, if any, could contain additional protections against UK tax.
Any arrangements between UK-resident entities of Bubblr and other entities of Bubblr are subject to the UK transfer pricing regime. Consequently, if any agreement between a UK resident entity of Bubblr and any other Bubblr entity (whether that entity is resident in or outside of the UK) is found not to be on arm’s length terms and, as a result, a UK tax advantage is being obtained, an adjustment will be required to compute UK taxable profits as if such an agreement were on arm’s length terms. Any transfer pricing adjustment could adversely impact the tax charge incurred by the relevant UK resident entities of Bubblr.
Recent Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial statements.
| F- 9 |
Reclassifications
Certain accounts have been reclassified in prior periods to conform to current period presentation. Compensation expense that was previously reported separately has been combined with general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss for all periods presented.
NOTE 3 – OTHER RECEIVABLES
As of September 30, 2023, and December 31, 2022, accounts receivable consisted of the following:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Deposit | $ |
|
$ |
|
||||
| UK VAT Receivable |
|
|
||||||
| Other receivables | $ |
|
$ |
|
||||
NOTE 4 - PROPERTY AND EQUIPMENT
As of September 30, 2023, and December 31, 2022, property and equipment consisted of the following:
|
Motor Vehicles |
Computer Equipment |
Office Equipment |
Total | |||||||||||||
| Cost | ||||||||||||||||
| At December 31, 2022 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||
| Additions | ||||||||||||||||
| Effects of currency translation |
|
|
|
|
||||||||||||
| At September 30, 2023 |
|
|
|
|
||||||||||||
| Less accumulated depreciation | ||||||||||||||||
| At December 31, 2022 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||
| Depreciation expense |
|
|
|
|
||||||||||||
| Effects of currency translation |
|
|
|
|
||||||||||||
| At September 30, 2023 |
|
|
|
|
||||||||||||
| Net book value | ||||||||||||||||
| At September 30, 2023 |
|
|
|
|
||||||||||||
| At December 31, 2022 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||
During
the nine months ended September 30, 2023, and 2022, the Company recorded depreciation expenses of $
NOTE 5 - INTANGIBLE ASSETS
A Patent on the Internet-Search Mechanism (“IBSM”) has been granted in the United States, South Africa, New Zealand, Canada, and Australia. The patent is pending in the European Union, and the United Kingdom.
Patents on Contextual Enveloping of Dynamic Hypertext Links and Real-Time Data Processing are pending in the United States
Patents
are reported at cost, less accumulated amortization, and accumulated impairment loss. Costs include expenditure that is directly attributable
to the acquisition of the asset. Once a patent provides economic benefit to the Company, amortization is provided on a straight-line
basis on all patents over their expected useful lives of
| F- 10 |
Intellectual Property
Intellectual
Property capitalizes the Company’s qualifying internal research and developments costs
.
Intellectual property is amortized
over its useful life of
Trademarks
The Company has the following trademarks.
| Mark | Category | Proprietor | Country | Class(es) | Status | Reg. Date. | File No. | |||||||
| CITIZENS JOURNALIST | Words | Bubblr Limited | European Union | 9 38 | REGISTERED | 16-Nov-2019 | 206382.EM.01 | |||||||
| CITIZENS JOURNALIST | Word | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 05-Jul-2019 | 206382.GB.01 | |||||||
| CITIZENS JOURNALIST | Words | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 16-Nov-2019 | 206382.GB.02 | |||||||
| CITIZENS JOURNALIST | Word | Bubblr Limited | United States | 9 38 41 42 | REGD-DEC USE | 08-Feb-2022 | 206382.US.01 | |||||||
|
Words and Color Device | Bubblr Limited | European Union | 9 38 | REGISTERED | 16-Nov-2019 | 206383.EM.01 | |||||||
|
Series of Logos | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 05-Jul-2019 | 206383.GB.01 | |||||||
|
Words and Color Device | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 16-Nov-2019 | 206383.GB.02 | |||||||
|
Words and Device | Bubblr Limited | United States | 9 38 41 42 | ACCEPTED | 206383.US.01 | ||||||||
| BAU NOT OK/BAU Not OK | Series of Marks | Bubblr Limited | United Kingdom | 9 38 | REGISTERED | 11-Oct-2019 | 208674.GB.01 | |||||||
| NEWZMINE/NewzMine | Series of Marks | Bubblr Limited | United Kingdom | 9 38 42 | REGISTERED | 25-Dec-2020 | 227753.GB.01 |
The Company capitalizes trademark costs where the likelihood of acceptance is expected. Each trademark has been determined to have an infinite useful life and is assessed each reporting period for impairment. If there has been a reduction in the value of the trademark or if the trademark is not successfully registered, the assets will be impaired and charged to expense in the period of impairment.
As of September 30, 2023, and December 31, 2022, trademarks consisted of the following:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Trademarks: | ||||||||
| NewzMine TM | $ |
|
$ |
|
||||
| Citizens Journalist™ |
|
|
||||||
| Effects of currency translation |
(
|
) |
(
|
) | ||||
| $ |
|
$ |
|
|||||
As of September 30, 2023, and December 31, 2022, intangible assets consisted of the following:
| Patents | Trademarks |
Intellectual Property |
Capitalized Acquisition Costs |
Total | ||||||||||||||||
| Cost | ||||||||||||||||||||
| At December 31, 2022 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
| Additions |
|
|
|
|||||||||||||||||
| Effects of currency translation |
|
|
|
|
||||||||||||||||
| At September 30, 2023 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
| Less accumulated amortization | ||||||||||||||||||||
| At December 31, 2022 | $ |
|
$ | $ |
|
$ |
|
$ |
|
|||||||||||
| Amortization expense |
|
|
|
|
||||||||||||||||
| Effects of currency translation |
|
|
|
|||||||||||||||||
| At September 30, 2023 | $ |
|
$ | $ |
|
$ |
|
$ |
|
|||||||||||
| Net book value | ||||||||||||||||||||
| At September 30, 2023 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
| At December 31, 2022 | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
| F- 11 |
During
the nine months ended September 30, 2023, and 2022, the Company purchased $
| Capitalized | ||||||||||||||||
| Intellectual | Acquisition | |||||||||||||||
| Nine months ended September 30, | Patents | Property | Costs | Total | ||||||||||||
| Three months 2023 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||
| 2024 |
|
|
|
|
||||||||||||
| 2025 |
|
|
|
|
||||||||||||
| 2026 |
|
|
|
|
||||||||||||
| 2027 |
|
|
|
|
||||||||||||
| 2028 |
|
|
|
|
||||||||||||
| Thereafter |
|
|
|
|
||||||||||||
| $ |
|
$ |
|
$ |
|
$ |
|
|||||||||
NOTE 6 – ACCRUED LIABILITIES
As of September 30, 2023, and December 31, 2022, accrued liabilities consisted of the following:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accruals | $ |
|
$ | |||||
| Accrued interest |
|
|||||||
| Directors Fees |
|
|||||||
| Dividends payable |
|
|
||||||
| Settlement payable |
|
|||||||
| Wages and salaries |
|
|
||||||
| Total Accrued liabilities | $ |
|
$ |
|
||||
NOTE 7 – LOAN PAYABLE
On
February 4, 2022, the Company issued a promissory note for the principal sum of $
In
November 2019, the Company purchased a vehicle under a capital finance arrangement. The term of this loan is
During
the nine months ended September 30, 2023, and 2022, the Company made $
| F- 12 |
At September 30, 2023, future minimum payments under the loan are as follows:
| Total | ||||
| 2023 (three months remaining in 2023) | $ |
|
||
| 2024 |
|
|||
|
|
||||
| Less: Imputed interest |
|
|||
| Loan payable |
|
|||
| Loan payable – current |
|
|||
| Loan payable - non-current | $ |
|
||
NOTE 8 - RELATED PARTY TRANSACTIONS
Loans from Related Parties
The Company had received a loan from a minority shareholder of $ in February 2022 that bore interest at the rate of % per annum. The principal of $ , plus accrued interest of $ , totaling $ was repaid on February 15, 2023. The related party loan of $ was borrowed in Q4 2021, which bore interest, and was repaid in full by April 30, 2022.
In
the nine months to September 30, 2023, the Company received a loan of $
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Beginning Balance | $ |
|
$ |
|
||||
| Effects of currency translation |
|
(
|
) | |||||
| Loan Payable |
|
|
||||||
| Addition |
|
|
||||||
| Repayment |
(
|
) |
(
|
) | ||||
| Ending Balance | $ |
|
$ |
|
||||
During the nine months ended September 30, 2023, and 2022, the Company received proceeds on these loans of $ ok directors fee and $ , respectively, made repayments of $ and $ , respectively, and accrued interest of $ and $ , respectively . The Loans from related parties were received in GBP, and any difference deduced is due to fluctuation in the exchange rate.
The
Company has loans from our founder, Stephen Morris, with a balance of $
Loan 1.
The loan is non-interest-bearing and repayable on demand.
| F- 13 |
On
September 6, 2022, the Company entered into a second amendment (the “Amendment”) with Bubblr Limited and Mr. Morris to add
$
On
December 20, 2022, the Company entered into a third amendment (the “Amendment”) with Bubblr Limited and Mr. Morris to reduce
the outstanding principal amount of the loan by $
In
aggregate, the Company received $
Loan 2.
On
September 7, 2022, our wholly owned subsidiary, Bubblr Limited, entered into a new loan agreement (the “Loan Agreement”)
with Mr. Morris for $
Activity on this loan to arrive at September 30, 2023, and December 31, 2022, balances is as follows:
|
Nine Months Ended September 30, |
Year Ended December 31, |
|||||||
| 2023 | 2022 | |||||||
| Beginning balance current | $ |
|
|
|||||
| Effects of currency translation |
|
(
|
) | |||||
| Loan Payable |
|
|
||||||
| Additions |
|
|||||||
| Conversion from preferred stock |
|
|
||||||
| Assignment of advances receivable |
|
(
|
) | |||||
| Ending balance – Current | $ |
|
$ |
|
||||
| Beginning balance non-current | $ |
|
$ | |||||
| Additions |
|
|||||||
| Effects of currency translation |
|
|
||||||
| Ending balance non-current | $ |
|
|
|||||
| Ending balance current and non-current | $ |
|
$ |
|
||||
NOTE 9 - WARRANT LIABILITY
The Company analyzed the warrants issued in connection with the Series C Convertible Preferred Stock (see Note 10) for derivative accounting consideration under ASC 815, Derivatives and Hedging, and determined that the instruments should be classified as a liability due to reset provisions and variability in exercise price resulting in there being no fixed value or explicit limit to the number of shares to be delivered upon exercise. ASC 815 requires us to assess the fair market value of the derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.
| F- 14 |
The Company determined our warrant liabilities to be a Level 3 fair value measurement during the year based on management’s estimate of the expected future cash flows required to settle the liabilities and used the Black Scholes pricing model to calculate the fair value as of September 30, 2023. The Black Scholes model requires nine basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black-Scholes valuation model.
For the period ended September 30, 2023, the estimated fair values of the warrant liabilities measured on a recurring basis are as follows :
| Nine Months Ended | ||||
| September 30, | ||||
| 2023 | ||||
| Expected term |
|
|||
| Expected average volatility |
|
% | ||
| Expected dividend yield |
|
% | ||
| Risk-free interest rate |
|
% | ||
The following table summarizes the changes in the warrant liabilities during the period ended September 30, 2023, and December 31, 2022:
| Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||
| Addition of new warrants | $ |
|
||
| Additional day-one loss |
(
|
) | ||
| Change in fair value of warrant liability |
(
|
) | ||
| Warrant liability as of December 31, 2022 | $ |
|
||
| Addition of new warrants | $ | |||
| Additional day-one loss | ||||
| Change in fair value of warrant liability |
(
|
) | ||
| Warrant liability as of September 30, 2023 | $ |
|
||
NOTE 10 - STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has authorized preferred shares with a par value of $ per share. The Board of Directors is authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes.
Series C Convertible Preferred Stock
On March 4, 2022, the Company filed a Certificate of Designation with the Wyoming Secretary of State, which established shares of the Company’s Series C Convertible Preferred Stock, with a Stated Value of $ per share.
The Company has the right to redeem the Series C Convertible Preferred Stock in accordance with the following schedule:
| ● |
|
|
| ● |
The
Company shall pay
|
| F- 15 |
The Series C Convertible Preferred Stock will vote together with the common stock on an as-converted basis subject to the Beneficial Ownership Limitations (as set forth in the Certificate of Designation).
On
March 4, 2022, the Company entered into a Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS
Investments, LLC (“GHS”), whereby GHS agreed to purchase, in tranches, up to $
On
March 4, 2022, the Company issued to GHS the first tranche of
shares of Series C Convertible Preferred Stock, as well as commitment
shares of
shares of Series C Convertible Preferred Stock and
warrant shares (the “GHS Warrant”). Warrant shares
represent
GHS
delivered gross proceeds of $
On March 9, 2022, the Company entered a Securities Purchase Agreement with Proactive Capital Partners LP (“Proactive”), whereby Proactive agreed to purchase shares of Series C Preferred Stock. .
The
Company agreed to issue Proactive commitment shares of
shares of Series C Convertible Preferred Stock and
warrant shares (the
“Warrant”). Warrant shares represent
On
March 9, 2022, the Company issued
shares of Series C Convertible Preferred stock to Proactive Capital Partners LP as per the Securities
Purchase Agreement. Proactive delivered gross proceeds of $
On
April 24, 2022, the Company issued the second tranche of
shares of Series C Convertible Preferred Stock and
warrant shares
as per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”),
of March 4, 2022. GHS delivered gross proceeds of $
On
May 25, 2022, the Company issued the third tranche of
shares of Series C Convertible Preferred Stock and
warrant shares as
per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”),
of March 4, 2022. GHS delivered gross proceeds of $
On
September 24, 2022, the Company issued the fourth tranche of
shares of Series C Convertible Preferred Stock and
warrant shares
as per its Securities Purchase Agreement (the “GHS Securities Purchase Agreement”) with GHS Investments, LLC (“GHS”),
of March 4, 2022. GHS delivered gross proceeds of $
| F- 16 |
On
September 7, 2022, our wholly owned subsidiary, Bubblr Limited, entered into a new loan agreement (the “Loan Agreement”)
with Mr. Morris for £
As
a result of the above transactions, the Company received total net proceeds of $
As at September 30, 2023 and December 31, 2022, the Company had shares of Series C Preferred Stock issued and outstanding.
Common Stock
The Company has authorized common shares with a par value of $ per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.
During the nine months ended September 30, 2022, the Company issued the following unregistered securities:
| ● |
shares for Executive Board Chair services valued at $
|
|
| ● |
shares for Investor Relations services valued at $
|
|
| ● |
shares for Consultancy services valued at $
|
|
| ● | shares as commitment shares under the Equity Financing Agreement with GHS. | |
| ● | shares to White Lion Capital, LLC as a result of a Termination and Release Agreement. | |
| ● |
shares of Series C Preferred Stock and
|
During the nine months ended September 30, 2023, the Company issued the following unregistered securities:
| ● |
shares for Consultancy services valued at $
|
|
| ● |
shares for Professional services valued at $
|
|
| ● |
shares for dividend due of Series C Preferred Stock valued at $
|
|
| ● |
shares for Investor Relations services valued at $
|
As at September 30, 2023, and December 31, 2022, the Company had and shares of common stock issued and outstanding, respectively.
The above securities were issued in reliance on the exemption from registration provided by Section 4.(a)(2) of the Securities Act of 1933, as amended, and/or in reliance on the exception from registration provided by Regulation S promulgated under the Securities Act of 1933, as amended.
Warrants
The Company identified conversion features embedded within warrants issued during the nine months ended September 30, 2022. The Company has determined that the conversion feature of the Warrants represents an embedded derivative since the conversion price includes a reset provision which could cause adjustments in redemption value and the number of shares issued upon exercise (see Note 9 - Warrant Liability).
A summary of activity during the nine-month period ended September 30, 2023, follows:
| Warrants Outstanding | Weighted Average | |||||||||||
| Number of | Weighted Average |
Remaining life |
||||||||||
| Warrants | Exercise Price | (years) | ||||||||||
| Outstanding, December 31, 2022 |
|
$ |
|
|||||||||
| Granted | - | |||||||||||
| Exercised | - | |||||||||||
| Forfeited/canceled | - | |||||||||||
| Outstanding, September 30, 2023 |
|
$ |
|
|||||||||
| Exercisable Warrants, September 30, 2023 |
|
$ |
|
|||||||||
The following table summarizes information relating to outstanding and exercisable warrants as of September 30, 2023:
| Warrants Outstanding | Warrants Exercisable | |||||||||||||||||
|
Number of Warrants |
Weighted Average Remaining Contractual life (in years) |
Weighted Average Exercise Price |
Number of Shares |
Weighted Average Exercise Price |
||||||||||||||
|
|
$ |
|
|
$ |
|
|||||||||||||
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|||||||||||||||
|
|
$ |
|
|
$ |
|
|||||||||||||
As at September 30, 2023, the intrinsic value of the warrants is $ , as the price of the Company’s stock was below the warrant exercise price.
2022 Equity Incentive Plan
Restricted Stock Units
On May 25, 2022, our board of directors and majority shareholders approved the adoption of the Bubblr, Inc. 2022 Equity Incentive Plan (the “2022 Equity Incentive Plan”) and, unless earlier terminated, will continue until May 25, 2032. A total of shares of common stock may be issued under the 2022 Equity Incentive Plan. The 2022 Equity Incentive Plan aims to foster and promote our long-term financial success and increase stockholder value by motivating performance through incentive compensation. The 2022 Equity Incentive Plan is intended to encourage participants to acquire and maintain ownership interests in our company and to attract and retain the services of talented individuals upon whose judgment and special efforts the successful conduct of our business is largely dependent.
If the employee is terminated for cause, the employee will forfeit the Restricted Stock Units (“RSUs”) awarded to date.
During the year ended December 31, 2022, the Company issued, pursuant to the 2022 Equity Incentive Plan, a total of RSUs to two Company executives pursuant to their employment agreements. (See Note 11 - Commitments and Contingencies) shares of performance-based stock compensation were scheduled to vest on each September 1, 2023, and September 1, 2024, respectively. The Company had elected to treat the award as a single award of shares that vests ratably over the vesting period.
The
RSUs were valued at $
, based on the market price of the Company’s common stock on the respective grant dates of the agreements,
which was $
per share, and were to be recognized as compensation expense over their two-year vesting period on a straight-line basis.
During the year ended December 31, 2022, the Company recorded stock-based compensation of $
On
January 31, 2023 (the “Termination Date”), the award of
RSUs was forfeited by the executives upon their termination
of employment. Pursuant to ASC-718-10-30-12, no compensation cost is recognized for instruments that employees forfeit for no cash or
other consideration because a service or performance condition is not satisfied. Further, the value of instruments for which the requisite
service is not rendered
before the award is fully vested is not recognized as an expense, and any
previously recognized costs are reversed upon forfeiture. As a result, the remaining unvested stock compensation of $
| F- 17 |
Stock Options
On
April 1, 2023, the
The Company determined our option liabilities to be a Level 3 fair value measurement during the year based on management’s estimate of the expected future cash flows required to settle the liabilities and used the Black Scholes pricing model to calculate the fair value as of the Grant Date of the options. The Black Scholes model requires nine basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black-Scholes valuation model.
| Nine Months Ended | ||||
| September 30, | ||||
| 2023 | ||||
| Expected term | – years | |||
| Expected average volatility | - | % | ||
| Expected dividend yield | % | |||
| Risk-free interest rate | – | % | ||
| Options | Weighted-Average | |||||||
| Outstanding | Exercise Price | |||||||
| Balance as of December 31, 2022 | $ | |||||||
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| Balance as of September 30, 2023 |
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| Options Outstanding | Options Exercisable | |||||||||||||||||
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Number of Options |
Weighted Average
Remaining Contractual life (in years) |
Weighted Average Exercise Price |
Number of Shares |
Weighted Average Exercise Price |
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| F- 18 |
As
of September 30, 2023, and December 2022, there were $
Equity Financing Agreements
On
February 1, 2022, Bubblr, Inc. entered into a Stock Purchase Agreement (the “SPA”) and Registration Rights Agreement with
White Lion Capital LLC (“WLC”).
In
consideration for entering into the SPA, on February 1, 2022, the Company issued
shares of common stock to WLC valued at $
On
March 22, 2022, the Company entered into a Termination and Release Agreement with WLC to extinguish the SPA and Registration Rights Agreement
in exchange for issuing
shares of common stock. The stock was issued on March 22, 2022, and was valued at $
On
March 4, 2022, the Company entered into an Equity Financing Agreement (“EFA”) and Registration Rights Agreement with GHS
Investments LLC (“GHS”). Under the terms of the EFA, GHS agreed to provide the Company with up to $
The
registration statement on Form S-1 was effective as of September 24, 2022. During the year ended December 31, 2022, and through September
30, 2023, GHS subsequently provided $
In
consideration for entering the EFA, on March 4, 2022, the Company issued
shares of common stock to GHS valued at $
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Premises
During
the nine months ended September 30, 2023, and 2022, the Company paid $
During
the nine months ended September 30, 2023, and 2022, the Company paid $
On
March 25, 2022, the Company entered into a service agreement with PCG Advisory, Inc. The term was nine months, commencing April 1, 2022.
PCG Advisory, Inc. received cash of $
| F- 19 |
Service Contracts
On
February 14, 2023, the Company entered into a service agreement with Beyond Media SEZC. The term is twelve months, commencing
February 14, 2023. Beyond Media will receive cash of $
On February 23, 2023, the Company entered into a service agreement with Milestone Management Services, LLC. The term is six months, commencing February 23, 2023. Milestone Media Services, LLC received shares of common stock as compensation valued at $ . The service agreement was terminated on August 23, 2023.
On
May 1, 2023, the Company entered into a service agreement with Outside-the-Box. The term is six months, commencing May 1, 2023.
Outside-the-Box is entitled to
shares of common stock valued at $
On
June 15, 2023, the Company entered into a service agreement with Launchpad IR. The term is six months, commencing September 15, 2023.
Launchpad IR will receive compensation of $
On
June 23, 2023, the Company entered into a service agreement with Wise Law P.C. Wise Law P.C. received
shares of common stock as compensation valued at $
Employment Agreements
David Chetwood
On April 1, 2023, our board of directors approved amended and restated employment agreement effective February 10 , 2023, in favor of Chief Financial Officer, David Chetwood.
The
amended employment agreement with Mr. Chetwood provides that we will compensate him with a yearly salary of $
Stephen Morris
On April 1, 2023, our board of directors approved amended and restated employment agreement in favor of our Chief Technical Officer, Stephen Morris.
The
amended employment agreement with Mr. Morris
provides that we will compensate him with a yearly
salary of $
Timothy Burks
On
April 1, 2023, our board of directors approved an employment agreement and stock option grant in favor of our Chief Executive Officer,
Mr. Burks. The employment agreement with Mr. Burks provides that we will compensate him with a yearly salary of $
| F- 20 |
Paul Morrissey
On
April 6, 2023, our board of directors approved a Non-Executive Board Agreement and Stock Option Grant in favor of Mr. Morrissey. The
agreement with Mr. Morrissey provides that we will compensate him with a yearly fee of $
Steven Saunders & Rik Willard
On May 31, 2022, our board of directors approved amended and restated employment agreements in favor of our then-Chief Executive Officer, Rik Willard, and our then-Chief Commercial Officer, Steven Saunders.
The employment agreement with Mr. Willard was amended as follows. In addition to his cash compensation, the Company agreed to further compensate Mr. Willard in accordance with our May 25, 2022, Equity Incentive Plan with restricted stock units, which vest annually over a period of two years. He was also entitled to health and vacation benefits and nine-month severance if terminated for good cause or if he resigns for good reason in a constructive termination. He was also entitled to vesting of the restricted stock units upon any termination of employment by the Company. Mr. Willard agreed to a two-year non-solicit restrictive covenant. The agreement will automatically be renewed for a further year on May 31, 2023.
The employment agreement with Mr. Saunders was amended as follows. In addition to his cash compensation, the Company agreed to further compensate Mr. Saunders in accordance with our May 25, 2022, Equity Incentive Plan with restricted stock units, which vests annually over a period of two years. He was also entitled to health and vacation benefits and nine-month severance if terminated for good cause or if he resigns for good reason in a constructive termination. He was also entitled to vesting of the restricted stock units upon any termination of employment by the Company. Mr. Saunders agreed to a two-year non-solicit restrictive covenant.
On January 31, 2023, Steven Saunders and Rik Willard entered into a separation agreement with the Company regarding the terms and conditions of their departures from the Company.
Pursuant to the provisions of the Separation Agreement with Mr. Saunders and in consideration for a complete release of claims, we agreed as follows:
| ● | As of the Separation Agreement date, Mr. Saunders is no longer an officer or director of our company, and all prior agreements with Mr. Saunders, including his employment agreement, are terminated in their entirety. | |
| ● | In satisfaction of all amounts due Employee, the Company agrees to pay Employee the total sum of $ , payable according to the following schedule: |
| ○ |
We
agreed to pay a lump sum of $
|
|
| ○ |
We
agreed to pay a lump sum of $
|
|
| ○ |
We
agreed to pay $
|
|
| ○ |
Final
payment of $
|
Mr.
Saunders forfeited
Pursuant to the provisions of the Separation Agreement with Mr. Willard and in consideration for a complete release of claims, we agreed as follows:
| ● | As of the date of the Separation Agreement, Mr. Willard is no longer an officer or director of our company, and all prior agreements with Mr. Willard, including his employment agreement, are terminated in their entirety. | |
| ● | In satisfaction of all amounts due Employee, the Company agrees to pay Employee the total sum of $ , according to the following schedule: |
| ○ |
We
agreed to pay a lump sum of $
|
|
| ○ |
We
agreed to pay a total of $
|
|
| ○ |
We
agreed to pay a total of $
|
|
| ○ |
The
final payment of $
|
| ● | Our shareholder, Stephen Morris, has transferred to Mr. Willard shares of his common stock. |
Mr.
Willard forfeited
NOTE 12 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date of issuance of this Quarterly Report on Form 10-Q and determined there were no subsequent events that would require adjustments to our disclosures in the consolidated financial statements.
| F- 21 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have a material adverse effect on our operations and future prospects on a consolidated basis include but are not limited to: changes in economic conditions, pandemics, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Business Overview
Bubblr, Inc. (DBA: “Ethical Web AI”) (the “Company”) is a revolutionary technology company that aims to redefine Internet search. With its focus on anonymity, fairness, and ethical principles, Bubblr, Inc. presents a unique approach to the future of the Internet. The Company boasts two groundbreaking products: an Open-Source platform for building community super apps and an anonymous consumer app as an alternative to Chat GPT. Ethical Web AI is a company founded on the principles of digital disruption, innovation, and the emerging importance of ethical Internet applications. We call this emergent global movement the “Ethical Web.”
Ethical Web AI is more than just a technology company; it represents a paradigm shift in the online landscape. The Company’s vision is rooted in the belief that the future of the Internet lies in anonymity and fairness. By fixing search, Ethical Web AI aims to address broader issues in the online world while ensuring consumer anonymity. This approach enables small businesses to compete effectively, driving revenue for local communities.
Bubblr’s Mission
Ethical Web AI is on a mission to transform how users interact with the Internet, offering innovative solutions that prioritize consumer privacy and enhance the user experience.
Products
Ethical Web AI’s product portfolio consists of two innovative offerings.
1. AI Seek Apps: Empowering Anonymity and Enhanced User Experience
The AI Seek app is an enhanced version of Chat GPT, offering anonymous access to the technology without any registration requirements. The app provides a significantly improved user experience over traditional Chat GPT services, making it an attractive option for consumers seeking a more private and seamless search experience. AI Seek ensures that the app remains advertisement-free, providing a refreshing alternative to traditional search engines that rely heavily on advertising and consumer data.
2. Open-Source SaaS Platform for Goods and Services: Empowering Business and Community
| 4 |
Ethical Web AI’s Open-Source SaaS platform for Goods and Services is a game-changer for businesses and consumers. The platform will exclusively work in apps (mobile or desktop), providing an anonymous search mechanism for consumers even when interacting with suppliers.
At the heart of the platform’s efficiency is Zero Party Data derived from suppliers registered through licensees. This data is continually updated in real-time, ensuring highly accurate and up-to-date information, unlike traditional search engines that rely on less reliable web-crawled data.
The platform’s unique subscription model will enable merchants to be listed on the platform, generating recurring revenue for Ethical Web AI.
Patents
1. Internet-Based Search Mechanism for Goods and Services
We have created a new Internet-Based Search Mechanism, which has been granted a patent in South Africa (2016/06947), New Zealand (725014), the United States of America (‘Utility Patent No. U.S. 10977387, Canada (2962520), and Australia (2015248619), and we have patents pending on the same processes in the European Union (15723990.6) and the United Kingdom (PCT/GB2015/051130).
This utility patent grants Ethical Web AI the advantage of asynchronous search and client anonymity, making its apps uniquely secure and user-friendly. The patent’s title, “Internet Search Mechanism for Goods and Services that Only Works in Apps,” reflects the Company’s commitment to providing app-exclusive services that enhance user privacy and security.
2. Contextual Enveloping of Dynamic Hypertext Links
US Patent Application No 17/980298: Contextual Enveloping of Dynamic Hypertext Links is a sister patent to our approved Internet-Based Search Mechanism patent that will define an alternative mobile search system purely for information rather than goods and services. This utility patent represents a significant advancement in the user experience, enhancing access to Chat GPT through Ethical Web AI’s AI Seek app. The patent enables anonymous access to Chat GPT, delivering results in web pages that can be shared across various platforms.
3. Real-Time Data Processing
US Patent Application No 18376101: Real-Time Data Processing in AI Models. This patent encompasses a groundbreaking methodology allowing AI models to handle queries that necessitate real-time, up-to-date information, heralding a transformative shift in AI capabilities .
Competition
The space for online marketplaces and ad networks is rapidly evolving. The Advertising Technology (Ad-tech) industry includes all kinds of tools, software platforms (Google, Facebook), agencies, data brokers, etc. It facilitates targeted advertisements that have become exponentially more invasive over the past decade due to massive amounts of personal data collection. It is a complex and opaque ecosystem that tracks, profiles, discriminates (both personal and business), and manipulates for profit. It is a multi-billion-dollar industry that is now facing litigation, investigations, and new regulations to curb its practices.
We face intense competition from companies with much larger capital resources than us, and, as a result, we could struggle to attract users and gain market share. Many of our existing or future competitors have greater financial resources and greater brand name recognition than we do and, as a result, may be better positioned to adapt to changes in the industry or the economy. We will strive to advance our technology in each of these sectors ahead of our competitors to gain market share. We also face intense competition in attracting and retaining qualified employees. Our ability to continue to compete effectively will depend upon our ability to attract new employees, retain and motivate our existing employees, and compensate employees competitively. We face significant competition in several aspects of our business, and such competition might increase, particularly in the market for networks and online marketplaces. A key advantage against better-resourced competitors is provisioning our technology and related acquisitions as an open-source SAAS platform. This pushes all consumer and merchant marketing responsibility to the registered partners.
| 5 |
Our competitors may announce new products, services or enhancements that better address changing industry standards or the needs of users, such as mobile access or different market focus. Any such increased competition could cause pricing pressure, loss of business or decreased user activity, any of which could adversely affect our business and operating results.
We believe that we have competitive strengths and protection via our IP, which is defensible under the umbrella protection of our granted patents.
Results of Operation
Revenues
| Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | |||||||||||||||||||||||||||
| Sales | $ | 1,151 | $ | - | $ | 1,151 | 100 | % | $ | 1,151 | $ | - | $ | 1,151 | 100 | % | ||||||||||||||||
| Total revenue | $ | 1,151 | $ | - | $ | 1,151 | 100 | % | $ | 1,151 | $ | - | $ | 1,151 | 100 | % | ||||||||||||||||
In the three months and nine months ended September 30, 2023, revenues were $1,151.We did not achieve revenues from operations in 2022. We will not achieve higher revenues unless we are able to develop, market, support and deliver our products and service offerings. There can be no assurances we can achieve significant revenues despite our efforts.
Operating Expenses
| Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | |||||||||||||||||||||||||||
| General and administrative | $ | 1,016,034 | $ | 172,600 | $ | 843,434 | 489 | % | $ | 2,211,310 | $ | 513,519 | $ | 1,697,791 | 331 | % | ||||||||||||||||
| Professional fees | 13,878 | 160,794 | (146,916 | ) | (91 | ) | 178,612 | 2,449,350 | (2,270,738 | ) | (93 | ) | ||||||||||||||||||||
| Sales and marketing | 93,125 | 63,300 | 29,825 | 47 | 511,141 | 145,488 | 365,653 | 251 | ||||||||||||||||||||||||
| Amortization and depreciation | 54,331 | 60,234 | (5,903 | ) | (10 | ) | 176,840 | 268,688 | (91,848 | ) | (34 | ) | ||||||||||||||||||||
| Research and development | 59,889 | 53,132 | 6,757 | 13 | 151,160 | 167,087 | (15,927 | ) | (10 | ) | ||||||||||||||||||||||
| Total operating expenses | $ | 1,237,257 | 510,060 | $ | 727,197 | 143 | % | $ | 3,229,063 | $ | 3,544,132 | $ | (315,069 | ) | (9 | )% | ||||||||||||||||
General and administrative
General and administrative expenses consist mainly of compensation and costs associated with non-specific costs of running the business. These include, but are not limited to, office costs, computer software, and telecoms.
The increase in general and administrative costs was primarily due to accrued compensation, director fees for new executives, and stock options awarded offset by the forfeiture of restricted stock units in the nine months ended September 30, 2022.
Professional fees
Professional fees consist of costs in relation to legal, accounting, and consultants.
| 6 |
The decrease in professional fees was primarily due to issuing shares of common stock valued at $1,993,081 in 2022 for consulting services.
Sales and Marketing
Sales and marketing costs are costs incurred specifically in relation to fees and expenses for investor relations, advertising, marketing, press releases, and public relations.
The cost increase is primarily due to new investor relations services contracts paid for by issuing shares of common stock.
Amortization and depreciation
A significant portion of the amortization and depreciation costs are from the amortization of patents and intellectual property. Most of the patents and intellectual property are held in the UK subsidiary, Bubblr Ltd.
The reduction in costs is primarily due to lower amortization of Intellectual Property as IP added in 2016 of $1.68m (£1.3m) is fully amortized.
Research and Development
Costs incurred in relation to the development of the Company’s platform include costs associated with development staff and specialist software for product development and deployments.
Other Income (Expense), Net
| Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | |||||||||||||||||||||||||||
| Interest income | $ | 29 | $ | 389 | $ | (360 | ) | (93 | )% | $ | 142 | 1,243 | (1,101 | ) | (89 | )% | ||||||||||||||||
| Interest expense | (7,704 | ) | (102,088 | ) | 94,384 | (92 | ) | (9,450 | ) | (547,352 | ) | 537,902 | (98 | ) | ||||||||||||||||||
| Gain on change in fair value of warrant derivative liability | 117,515 | 133,096 | (15,581 | ) | - | 114,984 | 384,383 | (269,399 | ) | (70 | ) | |||||||||||||||||||||
| Foreign currency transaction loss | (44,937 | ) | (127,776 | ) | 82,839 | (65 | ) | (6,520 | ) | (289,790 | ) | 283,270 | (98 | ) | ||||||||||||||||||
| $ | 64,903 | $ | (96,379 | ) | $ | 161,282 | (167 | )% | $ | 99,156 | $ | (451,516 | ) | $ | 550,672 | (122 | )% | |||||||||||||||
Interest Income
The Company earns interest income from its cash reserves and advances receivable. The decrease of interest is due to the loss of interest from the Company’s advances receivables, which were repaid in 2022.
Interest Expense
Interest expense consists of interest on borrowings, a Company vehicle, convertible notes, and related party loans.
Gain on change in fair value of warrant derivative liability.
The Company analyzed the warrants issued in connection with the Series C Convertible Preferred Stock (see Note 11) for derivative accounting consideration under ASC 815, Derivatives and Hedging. ASC 815 requires us to assess the fair market value of the derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense items.
The market price of the common stock has decreased from the initial award of warrants in the period ending September 30, 2023. If the warrants were exercised at September 30, 2023 at their respective exercise price determined at issue, the Company would realize a gain due to the difference between the cash received on conversion and the issue cost to the Company of $0.06 per share, the fair value market price of the common stock at September 30, 2023.
| 7 |
Foreign currency translation gain (loss)
The gains and losses on foreign currency translation are due to the fluctuations in the U.S. dollar and British Pound Sterling exchange rates.
Net Loss after income tax
The net loss after income tax was $1,171,203 and $606,439 for the three months ended September 30, 2023, and 2022, respectively.
The net loss after income tax was $3,128,756 and $3,995,648 for the nine months ended September 30, 2023, and 2022, respectively.
Liquidity and Capital Resources
The following table provides selected financial data about our Company on September 30, 2023, and December 31, 2022.
| Nine Months Ended | Year Ended | |||||||||||||||
| September 30, 2023 | December 31, 2022 | Change | ||||||||||||||
| Current Assets | $ | 10,753 | $ | 42,417 | $ | (31,664 | ) | (75 | )% | |||||||
| Current Liabilities | 2,436,789 | 595,856 | 1,840,933 | 309 | ||||||||||||
| Working Capital Deficit | $ | (2,426,036 | ) | $ | (553,439 | ) | $ | (1,872,597 | ) | 338 | % | |||||
Current Assets
Current assets consist of cash and other receivable.
The decrease in current assets was primarily due to a decrease in cash.
Current Liabilities
Current Liabilities consist of accounts payable, accrued liabilities, and loans.
The increase in current liabilities was primarily due to increases of $151,644 in accounts payable, $143,750 in accrued director fees, $900,521 in accrued wages and salaries, $154,185 for a settlement agreement with former executives, and $422,412 in additional related-party loans.
Working Capital Deficit
The working capital deficit increased by $1,872,597.
Liquidity
During the last two years, and through the date of this Report, we have faced an increasingly challenging liquidity situation that has limited our ability to execute our operating plan. We will need to obtain capital to continue operations. There is no assurance that we can secure such funding on acceptable terms.
As no revenues are generated from our current operations, we will require additional debt or capital to continue operating and expanding our business. Sources of additional financing or arrangements with third parties may include equity or debt financing, bank loans, related-party loans, or revolving credit facilities. We may not be successful in locating suitable financing transactions in the period required or at all, and we may not obtain the capital we require by other means. Unless we can attract additional investment, our operating as a going concern is in doubt.
| 8 |
We voluntarily file annual, quarterly, and current reports with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the rules subsequently implemented by the SEC and the Public Company Accounting Oversight Board (“PCAOB”) have imposed various requirements on public companies, including requiring changes in corporate governance practices. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities of ours more time-consuming and costly. To meet the needs to comply with the requirements of the Exchange Act, we will need an investment of capital.
If we are unable to obtain sufficient additional capital, we may have to cease filing our SEC reports and cease operations completely. If we obtain additional funds by selling any of our equity securities or by issuing common stock to pay current or future obligations, the percentage ownership of our stockholders will be reduced, and stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the common stock.
Cash Flow
|
Nine Months Ended September 30, |
||||||||||||||||
| 2023 | 2022 | Change | % | |||||||||||||
| Cash used in Operating activities | $ | (412,603 | ) | $ | (1,363,863 | ) | $ | 951,260 | (70 | )% | ||||||
| Cash used in Investing Activities | (21,935 | ) | (18,282 | ) | (3,653 | ) | 20 | |||||||||
| Cash provided by Financing Activities | 382,970 | 1,181,636 | (798,666 | ) | (68 | ) | ||||||||||
| Cash on Hand | $ | 1,660 | $ | 154,780 | $ | (153,120 | ) | (99 | )% | |||||||
Operating Activities
The decrease in net cash used in operating activities was primarily due to increased accrued liabilities.
Investing Activities
Net cash used in investing activities was on Patents and Trademarks.
Financing Activities
The reduction in net cash provided by financing activities was primarily due to $789,000 received in 2022 from Series C Preferred Stock issuance.
Cash on Hand
The reduction of cash on hand was primarily due to a reduction in fundraising in 2023.
The Company is currently exploring future fundraising options, including equity, debt, the sale of/or the licensing of the Company’s Patent(s) and/or IP, with a holdback of the Company’s rights to use the IP to secure funding for operations. If we cannot secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all. [if Jorge’s cash hits your bank before we file the 10-Q, we can put deleted language back in]
| 9 |
Critical Accounting Policies and Significant Judgments and Estimates
This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Preparing these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances, which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this Report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
We believe our most critical accounting policies and estimates relate to the following:
| ● | Foreign Currency Translations | |
| ● | Intangible Assets | |
| ● | Long-lived Assets | |
| ● | Income Taxes | |
| ● | Stock-based Compensation | |
| ● | Common Stock Purchase Warrants and Derivative Financial Instruments | |
| ● | Convertible Financial Instruments | |
| ● | Fair Value of Financial Instruments |
Foreign Currency Translations
The functional currency of the Company’s international subsidiaries is generally their local currency of Great British Pounds (GBP). Local currency assets and liabilities are translated at the rates of exchange on the balance sheet date, and local currency revenues and expenses are translated at weighted average rates of exchange during the period. Equity accounts are translated at historical rates. The resulting translation adjustments are recorded directly into accumulated other comprehensive income.
Intangible Assets
The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed on a straight-line basis over the estimated periods benefited. Patents, technology and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. When certain events or changes in operating conditions occur, an impairment assessment is performed, and lives of intangible assets with determinable lives may be adjusted.
Long-Lived Assets
Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on comparing the undiscounted future cash flows to the recorded value of the asset. The asset is written down to its estimated fair value if an impairment is indicated.
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax bases of assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
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Convertible Financial Instruments
The Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments if certain criteria are met. These criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable U.S. GAAP.
Fair Value of Financial Instruments
The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC Topic 718 Compensation - Stock Compensation which prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. Share-based payments to employees and non-employees, including grants of stock options, are recognized as compensation expenses in the financial statements based on the stock awards’ fair values on the grant date. That expense is recognized over the period required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). Stock Options awarded as compensation per the Company’s 2022 Equity Incentive Plan are deemed to be unissued until vested. Stock Option compensation is recognized as an expense over the vesting period. Awards forfeited due to unfulfillment of obligations, such as termination of employment prior to the award being fully vested, for no cash or other consideration, are not recognized as an expense, and any previously recognized costs are reversed in the period of forfeiture.
Common Stock Purchase Warrants and Derivative Financial Instruments
Common stock purchase warrants and other derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) contain reset provisions that do not qualify for the scope exception are classified as liabilities. The Company assesses the classification of its common stock purchase warrants and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.
Recent Accounting Pronouncements
For discussion of recently issued and adopted accounting pronouncements, please see Note 2 to the unaudited consolidated financial statements as of and for the quarters ended September 30, 2023, and 2022 included herein.
Off-Balance Sheet Arrangements
As of September 30, 2023, there were no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports is recorded, processed, summarized, and reported within the periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. However, our chief executive officer and our chief financial officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period being reported by this Form 10-Q and have concluded that we have material weaknesses and significant deficiencies in our internal control over financial reporting as described below. Accordingly, our disclosure controls and procedures were not effective or sufficient to accomplish their objectives at the reasonable assurance level as of September 30, 2023.
Management’s Report of Internal Control over Financial Reporting
Our chief executive officer and our chief financial officer are responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act. An evaluation was performed of the effectiveness of our internal control over financial reporting. The evaluation was based on the framework in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness in future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Based on our evaluation under the criteria set forth in the 2013 Internal Control-Integrated Framework, our management concluded that as of September 30, 2023, our internal control over financial reporting was not effective because of the identification of material weaknesses described as follows:
| ● | We did not have controls designed to validate the completeness and accuracy of underlying data used in the determination of accounting transactions. Accordingly, we have a material weakness because there is a reasonable possibility that a material misstatement to the interim or annual consolidated financial statements would not be prevented or detected on a timely basis. | |
| ● | We have limited written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act, which is applicable to us. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness. | |
| ● | We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets, and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness. | |
| ● | We have insufficient personnel with the requisite expertise in the key functional areas of finance and accounting. | |
| ● | We do not have a functioning audit committee and only one outside director on our board of directors, resulting in ineffective oversight in establishing and monitoring required internal controls and procedures. |
Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting
Our Management is committed to improving its internal controls when we have adequate resources to do so, and we appointed a full-time chief financial officer in February 2023. We will appoint outside directors and establish an audit committee in 2024. Due to the nature of these material weaknesses, misstatements that could be material to the annual or interim consolidated financial statements could occur that would not be prevented or detected during our financial close and reporting process.
Our Company plans to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have been unable to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management, and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we do not secure such funds, remediation efforts may be materially affected.
Changes in Internal Control over Financial Reporting
In the three months ended September 30, 2023, there were no material changes in our internal control over financial reporting that materially affected or are reasonably likely to affect our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any pending legal proceedings. We are unaware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
Item 1A: Risk Factors
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933.
In the nine months ended September 30, 2023, the Company issued the following unregistered securities:
| ● | 311,159 shares for dividend due of Series C Preferred Stock valued at $43,805. | |
| ● | 2,580,784 shares for consulting services valued at $450,338. |
These securities were issued pursuant to the exemption from registration contained in Section 4.(a)(2) of the Securities Act of 1933, as amended, and/or the exception from registration contained in Regulation S promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view toward distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
None
Item 6. Exhibits
See Exhibit Index below for exhibits required by Item 601 of Regulation S-K.
| Exhibit Number | Description of Exhibit | |
| 31.1** | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2** | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1** | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101** | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Extensible Business Reporting Language (XBRL). | |
| **Provided herewith |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BUBBLR, INC. | |
| Date: November 14, 2023 | /s/ Timothy Burks |
| Timothy Burks | |
| President and Chief Executive Officer | |
| (Principal Executive Officer) | |
| Date: November 14, 2023 | /s/ David Chetwood |
| David Chetwood | |
| Chief Financial Officer | |
| (Principal Accounting and Financial Officer) |
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